10-K 1 c68517e10-k.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2001 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-23950 ----------------------------------- KENMAR PERFORMANCE PARTNERS L.P. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK 11-2751509 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) TWO AMERICAN LANE, P.O. BOX 5150, GREENWICH, CONNECTICUT 06831-8150 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 861-1000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: LIMITED PARTNERSHIP INTERESTS (TITLE OF CLASS) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The registrant has no outstanding voting or non-voting common equity. ================================================================================ PART I ITEM 1. BUSINESS The discussion below and elsewhere in this Form 10-K contains "certain forward-looking statements" (as such term is defined in Section 21E of the Securities Exchange Act of 1934 (the "1934 Act")) that are based on the beliefs of the Fund, as well as assumptions made by, and information currently available to, the Fund. A number of important factors could cause the Fund's actual growth, results, performance and business prospects and opportunities in 2002 and beyond to differ materially from those expressed in, or implied by, any such forward-looking statements. These factors include, without limitation, the factors described below and elsewhere in this Form 10-K. OVERVIEW Kenmar Performance Partners L.P. (the "Fund") is a limited partnership (the "Partnership") under the New York Revised Limited Partnership Act. The Fund maintains its principal office at Two American Lane, P.O. Box 5150, Greenwich, Connecticut 06831-8150, with a telephone number of (203) 861-1000. The Fund is engaged in the speculative trading of commodities, futures contracts, forward contracts, foreign exchange commitments, swap contracts, spot (cash) commodities and other derivative products pertaining to any of the foregoing, in the United States of America and elsewhere throughout the world, which are referred to as commodity interests. The Fund trades commodity interests through the retention of independent commodity trading advisors, which are referred to as advisors. The objective of the Fund's business is appreciation of its assets through the speculative trading of commodity interests. To achieve this purpose, the Fund is also authorized to purchase the interests of other entities engaged in the business of trading commodity interests. In September 1985, the Fund began a private placement of units of limited partnership interests in reliance on exemptions under the Securities Act of 1933, as amended (the "1933 Act") including Section 4(2) and Rule 506 of Regulation D promulgated thereunder. Units are offered monthly at a price per unit equal to the then-current Net Asset Value per unit, with a minimum subscription of $26,250 for new investors other than individual retirement accounts ("IRAs") and qualified retirement plans and Keogh Plans ("Plans") and $10,500 for IRAs, Plans and existing unitholders of the Fund, which amounts include selling commissions of $1,250 and $500, respectively, unless waived in whole or in part. Since the Fund began the private placement in 1985, through March 15, 2002, 23,791 units have been sold for a total of $265,038,978. Effective March 31, 2000, the Fund terminated its offering of new Units. In February 2002, the General Partner (as defined herein) decided to discontinue the operations of the Partnership effective March 31, 2002. The General Partner (as defined herein) anticipates making final redemption payments to partners in April 2002. "Net Asset Value" is defined as total assets of the Fund less total liabilities as determined in accordance with the principles set forth in the Second Restatement of the Limited Partnership Agreement of the Fund, dated September 1, 1993, as amended January 15, 1996, or where no such principles are specified therein, in accordance with United States generally accepted accounting principles applied on a consistent basis. The term "Net Asset Value Per Unit" is defined in the partnership agreement to mean the Net Asset Value of the Fund divided by the number of units issued and outstanding as of the date of computation. Investors receive a Confidential Private Placement Memorandum and Disclosure Document (the "Disclosure Document") which sets forth the material terms of the investment and is updated every nine (9) months or earlier if there is a material change, as required by the regulations promulgated under the Commodity Exchange Act (the "CE Act"), and filed with the Commodity Futures Trading Commission (the "CFTC") in compliance with its Regulations. 2 Since September 1985, the Fund has engaged in the speculative trading of commodity interests and will continue to do so until March 31, 2002. The partnership agreement also provides that, after having been a unitholder for six months and upon ten business days prior written notice, a unitholder may require the Fund to redeem all or part of its units effective as of the close of business on the last day of any month at the Net Asset Value thereof on such date. In addition, pursuant to the partnership agreement, Kenmar may, in its sole discretion on 10 days' written notice or without notice under certain circumstances, require any unitholder to withdraw all or a portion of such unitholder's capital contribution from the Fund. The Fund's General Partner is Kenmar Advisory Corp., a Connecticut corporation. The General Partner is owned equally and indirectly by Kenneth A. Shewer and Marc S. Goodman, the sole directors of the General Partner. In accordance with the provisions of the CE Act and the rules of the National Futures Association (the "NFA"), the General Partner is registered as a commodity pool operator, the advisors are registered as such and the commodity brokers required to be registered as futures commission merchants are registered as such, each subject to regulation by the CFTC. Each is also a member of the NFA in its respective capacity. In addition, the Fund has hired the Volatility Hedge Program of Stonebrook Structured Products, LLC ("Stonebrook"), an overlay program designed to hedge the positions of traditional trend-following programs during periods identified by Stonebrook's systems as "high risk." As of October 22, 2001, the Partnership terminated its relationship with Stonebrook. The General Partner, to the exclusion of the unitholders, manages and conducts the business of the Fund. The General Partner (1) selects and monitors the independent advisors and the commodity brokers; (2) allocates and/or reallocates assets of the Fund among the advisors; (3) determines if an advisor or commodity broker should be removed or replaced; (4) negotiates management fees, incentive fees and brokerage commissions; (5) determines its own compensation; and (6) performs such other services as the Fund may from time to time request, except that all trading decisions are made by the advisors retained by Kenmar. In addition, the General Partner selects the commodity brokers that will clear trades for the advisors. Refco, Inc. and ING (U.S.) Securities, Futures & Options Inc. are currently the Fund's futures commission merchants, and Refco Capital Markets Ltd. ("Refco Capital Markets") is the Fund's foreign exchange dealer (Refco, ING BARINGS Futures & Options Clearing Services and Refco Capital Markets are collectively referred to herein as the "commodity brokers"). The Fund itself does not have any employees. Rather, the General Partner employs 35 persons as of March 15, 2002 and provides the Fund with the services of research, fund administration, client support (marketing), legal, and management information systems and analysis personnel to conduct its operational activities. The General Partner believes that the most effective means of controlling the risks of trading commodity interests is through a diversified portfolio of advisors. In general, the General Partner has sought to produce high returns while controlling risk through the selection of two or more advisors, often with diverse trading methodologies. The General Partner's ability to manage the Fund is dependent upon an informed and aggressive management style, one that identifies and acts quickly and decisively on shifting market trends. Market conditions must dictate the selection of a portfolio of advisors and the reallocation of assets among the advisors. Therefore, when market conditions suggest that an alternative trading style or methodology might be better suited to the current market environment, the General Partner alters the portfolio of advisors or the allocation of assets among the advisors, without prior notice to, or the approval of, the unitholders. 3 The Fund is not an operating company with "traditional" income or expenses. It is a stand-alone investment vehicle that offers investors the opportunity to participate in commodity interest trading under the guidance of professional advisors. FEES AND EXPENSES Due to the General Partner's active and dynamic allocation and reallocation of the Fund's assets, the fees and expenses set forth below are subject to change at any time. Accordingly, the following fees and expenses are the current fees charged and expenses of the Fund as of March 15, 2002. FEES TO THE GENERAL PARTNER. The General Partner (1) manages and operates the Fund, (2) manages and monitors the Fund's portfolio of advisors, (3) pays all of the ordinary operating and administrative expenses of the Fund (except those described under "Legal Fees and Expenses" below), and (4) pays appropriately registered selling agents continuing compensation. To compensate the General Partner for the foregoing, the Fund pays the General Partner an administrative fee equal to 0.0833% (1% annually) of the prior month's beginning Net Asset Value of the Fund. Ordinary administrative expenses include, but are not limited to, accounting, auditing, record keeping, administration, computer and clerical expenses (including expenses incurred in preparing reports and tax information to unitholders and regulatory authorities, printing and duplication expenses and mailing expenses), and other expenses incurred by such persons and by the General Partner and its affiliates in providing services to the Fund. ADVISORY MANAGEMENT FEES. The Fund pays each advisor a monthly management fee ranging from 0.0% to 1/12 of 2% (0% to 2% per year) of the Net Asset Value of the assets allocated to each advisor for management, referred to as an advisor's portion, prior to reduction for the management fee. ADVISORY INCENTIVE FEES. Except as provided in the following sentence, the Fund pays each advisor an incentive fee ranging from 10% to 25% of the net new trading profits generated by the advisor through the trading of its advisor's portion. Except with respect to Stonebrook (the General Partner receives 100% of the incentive fees payable to Stonebrook), the General Partner does not receive any portion of the fees payable to any advisor. The Fund may enter into substantially similar compensation arrangements with other advisors. The net new trading profits, which are the net trading profits earned on an advisor's portion, excluding interest or interest equivalent income, decreased by brokerage commissions (paid and change, if any, in accrued), and decreased by the management fee, if any, with all such items determined from the first day of the calendar quarter that immediately follows the last calendar quarter for which an incentive fee was earned by the advisor (or, if no incentive fee was earned previously by the advisor, from the date such advisor was allocated its advisor's portion) to the close of business on the last day of the calendar quarter with respect to which such incentive fee calculation was made, generated by an advisor on its advisor's portion generally equals: - the net trading profits (realized and the change, if any, in unrealized) earned on the advisor's portion, excluding interest or interest-equivalent income, - decreased by brokerage commissions paid and the change, if any, in accrued, and - decreased by the management fee, if any. All of the above items will be determined from (1) the first day of the calendar quarter that immediately follows the last calendar quarter for which an incentive fee was earned by the advisor or (2) if no incentive fee was earned previously by the advisor, from the date the advisor was allocated its 4 advisor's portion, to the close of business on the last day of the calendar quarter for which the incentive fee calculation is being made. Any incentive fees paid to an advisor will be retained by it even if that advisor subsequently experiences losses. The Fund will not pay additional incentive fees to an advisor that has experienced losses, until those loss carryforwards have been recovered. An advisor's loss carryforward will be proportionately reduced for any withdrawals from such advisor of either notional or actual funds. Because each advisor receives an incentive fee on its performance, it is possible that one or more advisors may receive incentive fees during the same time in which the Fund and other advisors sustain a net loss. In addition, if an advisor is retained after the Fund has suffered a net loss, that advisor might receive an incentive fee based on trading profits it earns even though some or all of those trading profits were merely a recovery of a loss carryforward previously incurred by the advisors that earlier managed the Fund's assets. The advisor's incentive fees are subject to equal allocation among investors even though investors may have purchased their units at different times. Therefore, such costs are not reflective of each investor's investment experience, but of the Fund's performance as a whole. By allocating the expenses equally among investors, the Fund is able to maintain a uniform Net Asset Value per Unit. INVESTEE POOL FEES. If the Fund invests in an investee pool, the Fund will be responsible for its pro rata share of any fees, expenses or charges of that investee pool. Currently, the Fund is not invested in any investee pool. BROKERAGE COMMISSIONS. Commodity brokerage commissions for futures trades are typically paid on the completion or liquidation of a trade and cover both the purchase or sale of a futures contract and the subsequent offsetting sale or purchase (each, a "roundturn transaction"). The Fund's current brokerage expenses range from $9.56 to $30 per roundturn transaction, plus non-member exchange fees and NFA transaction fees. United States exchange fees (including NFA fees) range from approximately $1.24 to $2.84 per roundturn transaction. Foreign exchange fees range from approximately $1.18 to $16 per roundturn transaction, except that foreign exchange fees on certain Japanese financial instruments are $55 per roundturn transaction. For managing the Fund's investment with the advisors, the General Partner and/or its affiliate will receive from the brokers a portion of the brokerage commissions paid by the Fund. Each of the commodity brokers retains no more than $10 per roundturn transaction and the ING BARINGS Futures & Options Clearing Services retains no more than $5.75 per roundturn transaction. The General Partner receives the remainder of such fees as partial compensation for managing the Fund. The General Partner may in its sole discretion negotiate brokerage commissions with other commodity brokers or foreign exchange dealers on such terms as it deems in the best interest of the Fund. Those agreements may or may not be similar to the above brokerage arrangements. LEGAL FEES AND EXPENSES. The Fund will be responsible for all legal fees, expenses and disbursements incurred by the Fund. These expenses may include outside counsel's telephone, mail, fax and copying charges, as well as the Fund's filing fees, whether paid by the General Partner or outside counsel. Legal fees for the calendar year ended December 31, 2001 were approximately $28,000. EXTRAORDINARY EXPENSES. The Fund will be responsible for all extraordinary expenses (e.g., litigation expenses) incurred on its behalf. As of the date of this report, the Fund has not paid, and does not anticipate paying, any extraordinary expenses. 5 OTHER EXPENSES OF THE UNITHOLDERS. Although not an expense of the Fund, upon initially investing in the Fund, investors may be subject to a selling commission payable to independent selling agents. The selling commission may be equal to up to 5% of the Net Asset Value per Unit at which the units were purchased, unless the payment of all or any portion of such amount is waived by the selling agent. INTEREST ON ASSETS. Each month, the Fund receives all interest or interest-equivalent income actually earned on the Fund's assets during that month. The following chart reflects the actual fees and expenses for the periods presented. See "Selected Financial Data" below.

~~Year~~2001 ~~Ended December 31, --------------------------------------------------------------~~ 2000 1999 1998 1997 ~~1996~~ ------ ------ ------- ------- ------- (IN THOUSANDS) Brokerage Commissions $2,282 $6,572 $9,130 $12,437 $16,884 ~~$15,905~~ Management Fees 431 1,008 2,114 2,320 2,721 ~~3,317~~ Incentive Fees 281 801 854 6,600 1,417 ~~6,406~~ General Partner's Administrative Fee for Operating Expenses 99 235 618 646 949 ~~1,233~~ Other Expenses 29 46 98 100 137 ~~228~~

CONFLICTS OF INTEREST THE GENERAL PARTNER Each broker pays to the General Partner and/or its affiliates a portion of the brokerage commissions paid by the Fund to the brokers. This arrangement creates a conflict of interests for the General Partner (1) between its responsibility to minimize brokerage commissions and its interest in increasing its income through higher fees, and (2) in selecting advisors who trade more actively over advisors who trade less actively. In addition, the General Partner maintains business relationships with certain advisors and brokers. The General Partner has a conflict of interest between its responsibility to negotiate and minimize brokerage commissions and its desire to maintain these business relationships. The General Partner is authorized under the partnership agreement to set the compensation it receives for its services as general partner of the Fund. As such, the General Partner has a conflict of interest between limiting fees paid by the Fund and generating fees for itself. The General Partner and its affiliates currently manage other commodity pools and managed accounts. The General Partner may be subject to conflicting demands in respect of allocating management time, services and other functions between the General Partner's activities on behalf of the Fund and the General Partner's activities on behalf of other investors, commodity pools, managed accounts and/or trading advisors. Additionally, the General Partner may find it more difficult to maintain the quality of these services as the amount of its assets under management grows. The General Partner also may have a conflict of interest between its responsibility to select the best commodity trading advisors for the Fund and its responsibility to select the best commodity trading advisors for the other commodity pools and managed accounts for which it serves as manager. The General Partner and its affiliates are compensated for providing marketing services to certain commodity trading advisors, including some of the advisors, and for arranging to have assets placed under the management of such advisors. In addition, a substantial amount of the assets under the management of certain advisors are assets of pools and accounts managed by the General Partner or an 6 affiliate. This could have an influence on how these advisors do business with the General Partner and the Fund. In allocating the Fund's assets among advisors and in determining which advisors to retain or dismiss, the General Partner may have a conflict of interest between allocating funds to trading advisors that have a business relationship with the General Partner or its affiliates, and allocating funds to trading advisors that do not have a business relationship with the General Partner. The General Partner and its affiliates, principals, directors, officers or employees, referred to as related persons, do not trade commodities for their own accounts, although it is possible that they may do so in the future. If they do, you will not have access to the records of their trading. If the General Partner or a related person were to trade for their own accounts, they could take positions either similar or opposite to positions taken by the Fund. In addition, the Fund and the General Partner or a related person could from time to time be competing for similar commodities. Orders placed by the General Partner or a related person to trade commodities for their proprietary accounts may reach the market either before or after similar orders are placed for the Fund and this difference in timing may result in the Fund receiving less or more favorable prices than the prices received by such proprietary accounts. Neither the General Partner nor any related person places orders for any advisor and, therefore, neither the General Partner nor any related person has control over such timing. It is also possible that the positions taken by the proprietary accounts of the General Partner or its related persons may not be held for the same period of time as the positions taken by the Fund. Thus, it is unlikely that trading results in the General Partner's and the related persons' proprietary accounts would be the same as the performance in the Fund's account. THE ADVISORS The advisors may manage other commodity pools and managed accounts and trade for their own proprietary accounts. Since some of the advisors are trading and will continue to trade other pools and accounts, those advisors may be subject to conflicting demands in respect of allocating management time, services and other functions between the Fund and those other pools and accounts. In particular, an advisor may have a conflict of interest when rendering advice to the Fund because it may be compensated differently for managing other pools and accounts than for the Fund's account. The advisors may have financial incentives to favor such other accounts over the Fund. However, each advisor has agreed in its advisory agreement that it will not deliberately favor other accounts over the Fund. An advisor may in the future develop trading methods or strategies for trading commodities similar to or different from those employed and traded on behalf of the Fund's account. Other accounts managed by the advisor pursuant to those strategies may take positions similar to or opposite from positions taken by the Fund. No assurance can be given that the trading results in the other accounts managed by the advisor will be the same as the performance in the Fund's account. Some of the advisors or their employees currently trade commodities for their own accounts, and any or all could do so in the future. You will not have access to the records of such proprietary trading. The advisors' proprietary trading activity could differ from the Fund's trading activity. For example, the trading positions taken and the length of time such positions are held by the Fund could differ from those taken with respect to an advisor's proprietary accounts. In addition, the advisors' proprietary accounts could be charged brokerage commissions in a significantly different form and amount than those charged the Fund and, as a result, could be more or less likely to modify, liquidate or open a position for that account than for the Fund's account. Orders for trades for an advisor's proprietary accounts could be placed either before or after similar orders are placed for the Fund's account, and this difference in timing could result in the Fund's account receiving less favorable (or more favorable) prices than those received by the advisor's proprietary accounts. No assurance can be given that the trading results in an advisor's proprietary accounts will be similar to the performance in the Fund's account. 7 The CFTC and certain U.S. commodity exchanges have established "speculative position limits" that limit the net long or net short speculative position any person may control in a particular commodity on any day. An advisor and its affiliates may, on any day, reach the established position limits in a given commodity for all or a portion of its accounts and, therefore, might be unable to trade that commodity for the Fund in the same manner it otherwise would. The Fund is unable to determine what effect an advisor's inability to trade a commodity as a result of speculative position limits would have on the Fund's performance results. THE BROKERS The brokers effect transactions for other customers, including public and private commodity pools, from time to time. A broker's other customers may compete with the Fund's transactions, including the priority of order entry. In addition, employees of the brokers may trade for their own accounts. Since the identities of the purchaser and seller of a commodity are typically not disclosed until after the trade, the brokers may effect transactions for the Fund in which the other parties to the transactions are the broker's officers, directors, employees, customers, or affiliates. Such persons may compete with the Fund in making purchases or sales of commodities without knowing that the Fund is also bidding on such commodities. Since orders are filled in the order in which they are received by a particular floor broker, transactions for any of those persons might be executed when similar trades for the Fund are not executed or are executed at less favorable prices. However, in entering orders for the Fund and its other customer accounts, each broker has agreed to use its good faith and best efforts to treat all of its accounts equitably. In addition, CFTC regulations prohibit a futures commission merchant from utilizing its knowledge of one customer's trades for its own or its other customers' benefit. RECOURSE BY UNITHOLDERS In evaluating the potential and actual conflicts of interest described above, you should be aware that the General Partner has a responsibility to each unitholder to exercise good faith and fairness in all dealings affecting the Fund. The responsibility of a general partner to limited partners is a changing area of the law. You should consult your legal counsel if you have questions regarding the General Partner's duties. In the event that you believe that the General Partner has violated its responsibilities, you may seek legal relief for yourself and all other similarly situated unitholders or on behalf of the Fund under applicable laws to recover damages from, or to require an accounting by, the General Partner. Furthermore, you are afforded certain rights to institute reparation proceedings under the CE Act for violations of the CE Act or of any rule, regulation or order of the CFTC by the General Partner, a commodity broker, or a foreign exchange dealer subject to regulation under the CE Act. You also may institute legal proceedings in court against the General Partner, the brokers or an advisor for certain violations of the CE Act or rules, regulations or orders of the CFTC. Excessive trading of an account has been held to constitute a violation of the antifraud provisions of the CE Act. You should be aware, however, that it may be difficult to establish that the Fund's account has been excessively traded due to the broad trading discretion given to the General Partner in the partnership agreement and the advisors in the advisory agreements, the exculpatory provisions in the partnership agreement and in the advisory agreements, and the lack of definitive standards in judicial and administrative decisions as to what constitutes excessive trading. Under the exculpatory provisions of the partnership agreement, the General Partner will not be liable to the Fund or to any of the unitholders for its conduct, unless its actions constitute fraud, willful misconduct, gross negligence or bad faith. As a result, you may have a more limited right of action than you would if the partnership agreement did not contain such limitations. 8 The Fund has agreed to indemnify the General Partner and its shareholders, officers, directors, employees, and agents for the General Partner's conduct taken as the general partner of the Fund or in connection with the partnership agreement, provided that such person's conduct did not constitute willful malfeasance or gross negligence and was done in good faith and in a manner reasonably believed to be in, or not opposed to, the best interests of the Fund. In any action brought by a unitholder on behalf of the Fund, the General Partner and its affiliates may be indemnified only to the extent and subject to the conditions specified in the New York Revised Limited Partnership Act. Also, indemnification of the General Partner and its affiliates by the Fund may be limited for losses and liabilities resulting from violations of federal, state or foreign securities law in connection with the offer or sale of units. The CFTC has issued a statement of policy relating to indemnification of officers and directors of a futures commission merchant (such as each of the commodity brokers) and its controlling persons. The CFTC takes the position that the determination of whether or not such an indemnification is consistent with the policies expressed in the CE Act will be made by the CFTC on a case-by-case basis. COMMODITY INVESTMENT TRADING AND THE ADVISORS The profitability of commodity trading depends in large part upon the accurate forecasting of price moves or trends in commodities. No assurance can be given as to the accuracy of an advisor's forecasts or that an advisor's trading methods, strategies or decisions will be successful. Competing trading approaches and analysis methods are discussed below. SYSTEMATIC AND DISCRETIONARY TRADING APPROACHES A systematic trader primarily relies on trading programs or models that generate trading signals. Although the systems are changed from time to time (typically infrequently), the trading instructions generated by the advisor's system are usually followed without significant additional analysis or interpretation. However, systematic traders do make decisions concerning which markets to follow and which commodities to trade, whether to liquidate a position in a contract that is about to expire, whether to engage in an exchange of futures for physical ("EFP") transaction, and how large a position to take in a particular commodity. Although a systematic trader's judgment on these issues may affect a trader's performance, the trader's performance will primarily be based on the system used to generate signals. A discretionary trader makes all trading decisions on the basis of its own judgment. Although a discretionary trader may use computer programs, fundamental analysis and market charts to assist its decision-making process, it generally will make its trading decisions based on "trading instinct" rather than trading signals generated by a systematic program or model. Both systematic and discretionary trading approaches necessarily involve risks, including the possibility that a trader will incur substantial losses because it has misjudged a market. Systematic traders sometimes fail to capitalize on market trends that their systems have identified due to the judgmental decisions they make in applying their automated trading systems. On the other hand, discretionary traders may enter trades that would not be signaled by a system, possibly resulting in significant losses. TECHNICAL AND FUNDAMENTAL ANALYSIS Many commodity trading advisors use varying mixtures of technical and fundamental analysis. Fundamental analysis is based on a study of factors external to the trading markets that affect supply and demand of a particular commodity in an attempt to predict future price levels. The factors considered 9 include governmental policies, national and international political and economic events, changing trade prospects and similar factors that affect the supply and demand for a particular commodity. A limiting factor in the use of fundamental analysis is that the analyst may not have knowledge of all of the pertinent factors affecting supply and demand of a particular commodity, and prices may be affected by factors the analyst did not consider. Technical analysis, to the contrary, attempts to examine objective data (such as actual daily, weekly, and monthly price fluctuations, volume variations, and changes in open interest and other related mathematical, statistical, or quantitative data) to predict commodity prices. A limiting factor in the use of technical analysis is that a technical approach generally requires price movement data that can be translated into price trends sufficient to dictate a market entry or exit decision. No assurance can be given as to the existence of major price moves. Moreover, a technical trading method or strategy will not be profitable if there are no price moves or trends of the kind the method or strategy seeks to identify and follow. In the past, the markets have endured sustained periods without discernible trends and, presumably, such periods will continue to occur in the future. Periods without such price moves may produce losses. In addition, any factor that would lessen the prospect of major trends occurring in the future (such as increased governmental control of or participation in a market) may reduce the prospect that a particular trading method will be profitable in the future. Finally, a technical trading approach may underperform other trading approaches when fundamental factors dominate price moves within a given commodity market. Regardless of whether a trader uses fundamental analysis, technical analysis, some combination of the two or some other method, any factor that would make it more difficult to execute trades at desired prices in accordance with the signals of that trading method (such as a significant lessening of liquidity in a particular market) would be detrimental to profitability. Also, many commodity trading advisors may utilize similar analyses in making trading decisions, possibly resulting in a bunching of buy and sell orders. When that occurs, the Fund may find it more difficult to take or liquidate a position. TREND-FOLLOWING TRADERS "Trend-followers" employ a trading approach that seeks to take advantage of major price movements, while other traders seek profitability by making numerous small trades on a short-term basis or by using various arbitrage techniques. Because trend-followers assume that most of their trades will be unprofitable, they must make large profits from major trends to offset the numerous, smaller losses they incur. During periods when no major price trends develop in a market, a trend-follower will likely incur substantial losses. ADDITIONAL MATTERS The development of a commodity trading strategy is a continual process. As a result of ongoing analysis and research into the performance of an advisor's methods, changes may have been made from time to time in the specific manner in which these trading methods evaluate price movements in various commodities, and it is likely that similar revisions will be made in the future. In other words, the trading methods that an advisor may use in the future might differ from those presently being used. In addition, each advisor may trade any available commodity or in any market -- whether inside or outside of the U.S. -- it chooses, even if the advisor has never previously traded that commodity or in that market. However, you will not be informed of any changes in an advisor's trading methods, unless the General Partner is informed of that change and considers it a material change. Additionally, as discussed above, trading decisions of discretionary advisors require a substantial exercise of judgment. The decision not to trade certain commodities or not to make certain trades may result at times in missing price moves and profits 10 of great magnitude, which other trading managers who are willing to trade these commodities may be able to capture. Certain advisors may also engage in transactions in physical commodities, including EFPs. An EFP is a transaction permitted under the rules of many futures exchanges in which two parties holding futures positions may close out their positions without making an open, competitive trade on the exchange. Generally, the holder of a short futures position sells the physical commodity. The prices at which such transactions are executed are negotiated between the parties, and such prices may, under certain circumstances, vary significantly from the actual prices at which the transactions are traded on the relevant exchanges. SYNOPSIS OF THE ADVISORS The independent advisors are responsible for making the trading decisions for the Fund. In addition, effective October 1, 2000, the Fund hired Stonebrook's Volatility Hedge Program, an overlay program designed to hedge the positions of traditional trend-following programs during periods identified by Stonebrook's systems as "high risk." As of October 22, 2001, the Partnership terminated its relationship with Stonebrook. The independent advisors have prepared the following descriptions. These descriptions are summaries and are therefore qualified in their entirety by reference to the detailed descriptions contained in the independent advisors' disclosure documents, copies of which may be obtained by a prospective investor upon request to the General Partner. Due to the confidential and/or proprietary nature of most of the information, such as trading methods and strategies and the performance tables, the General Partner is relying on the independent advisors for the accuracy thereof. THE MAJOR INDEPENDENT ADVISORS. The Commodity Futures Trading Commission only requires disclosure of major advisors, i.e., those allocated at least ten percent of the Fund's assets. Set forth below is a brief description of the portfolio of major advisors trading for the Fund as of March 15, 2002, which differs in part from the portfolio of advisors in 2001. CRABEL CAPITAL MANAGEMENT, L.L.C. The sole principal of Crabel Capital Management, L.L.C. ("Crabel") is Toby Crabel. Crabel employs a multi-system, countertrend and momentum-based approach designed to profit on the markets' shortest-term price patterns. Signals are exclusively based off analyses of intra- and inter-day price data. Crabel will use different systems in each individual market based on the market's liquidity, historical profitability and volatility. In all cases, however, the countertrend and momentum strategies are given equal weightings; there is no bias given to any approach. All trades are accompanied by profit and time stops with profit stops based on a percent of the daily average price range. Currently the portfolio is weighted equally between global interest rates, currencies, global stock indices and traditional commodity markets. SHERIDAN INVESTMENTS INCORPORATED. Donald M. Newell, Philip G. Hubbard and Richard Morrison are the sole managing principals of Sheridan Investments Incorporated ("Sheridan"). Mr. Newell has also been a principal of LaSalle Portfolio Management, Inc., a registered commodity trading advisor and commodity pool operator, since 1984. The approach used to direct the trading for Sheridan focuses on exchange-traded futures and options on U.S. fixed income investments, seeking to add value to a long fixed income portfolio through a variety of option-related strategies. Risk is managed by monitoring market volatility, as well as through defensive option strategies designed to limit potential losses. As of June 2000, the Partnership terminated its relationship with Sheridan. 11 IXORCAP. IXORCAP is a limited liability company organized under French law ("IXORCAP"). Olivier Dozat, Herve d' Halluin and Veronique Courlier are the principals of IXORCAP. IXORCAP utilizes a technical trading system which attempts to detect trends in price movements from future contracts. Technical trading systems seek to establish positions and to exit the market and/or establish reverse positions when the favorable trend either reverses or does not materialize. Because of the nature of futures markets, prices frequently appear to be trending when the market is, in fact, without a trend. In addition, a trading system may identify markets as trending favorably to a particular position even though actual market performance thereafter is the reverse of the trend identified. CLARKE CAPITAL MANAGEMENT, INC. Michael J. Clarke is the president and sole principal of Clarke Capital Management, Inc. ("CCM"). The general trading strategy of CCM is trend following. Each of its trading models generates its own entry and exit signals and trades both sides of the market (long and short). The models vary from intermediate through long-term to very long-term in time-frame focus. None of the models has been custom tailored to any individual market or group of markets. WINTON CAPITAL MANAGEMENT, LIMITED is a United Kingdom company which has three principals, David W. Harding, Osman Murgian and Martin J. Hunt. Winton employs a proprietary, technical, trend-following trading system. This system tracks the daily price movements from various markets around the world, and carries out certain computations to determine each day how long or short the portfolio should be to maximize profit within a certain range of risk. If rising prices are anticipated, a long position will be established; a short position will be established if prices are expected to fall. STONEBROOK. Stonebrook Structured Products is a New York-based financial engineering firm founded by Dr. Jerome Abernathy in 1993. Since then, the group has evolved into an asset management and consulting firm managing more than $380 million in a variety of investment strategies, many of them customized for individual clients. Utilizing a team approach, Stonebrook focuses on developing solution-based investment strategies for its clients. Stonebrook's Volatility Hedge Program (VHP) is an options-based technical system designed to reduce the risk associated with trend-following portfolios. VHP is employed as an overlay to protect profits against market reversals. As of October 22, 2001, the Partnership terminated its relationship with Stonebrook. Dr. Jerome Abernathy is managing partner at Stonebrook. Prior to starting Stonebrook in 1993, Dr. Abernathy was director of research at Moore Capital Management in New York. Prior to joining Moore, he was manager of the analytical trading group at Merrill Lynch in New York. He began his career at Morgan Stanley where he was a trader in the analytical proprietary trading group. Dr. Abernathy holds a Ph.D. in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology where he also attended the Sloan School of Management. THE BROKERS The General Partner has responsibility for selecting and monitoring the Fund's brokers. The General Partner has selected Refco, Inc. and ING BARINGS Futures & Options Clearing Services as the 12 Fund's commodity brokers and Refco Capital Markets Ltd. as the Fund's foreign exchange dealer. The Fund has received the information below from each of the brokers. Accordingly, the Fund makes no representation as to the completeness, accuracy, or adequacy of the following disclosures. THE COMMODITY BROKERS REFCO, INC. Refco, Inc. ("Refco") is an Illinois corporation with a principal place of business at 111 West Jackson Boulevard, Chicago, Illinois 60604-3593, with a telephone number of (312) 930-6500. Refco is registered as a futures commission merchant with the CFTC and is a member of the NFA in such capacity. According to Refco, as of December 31, 2001, neither Refco nor any of its principals have been the subject of any administrative, civil, or criminal action, whether pending, on appeal, or concluded, within the preceding five years that Refco would deem material for purposes of Part 4 of the Regulations of the CFTC, except as follows: On December 20, 1994, Refco settled a CFTC administrative proceeding (In the Matter of Refco, Inc., CFTC Docket No. 95-2) in which Refco was alleged to have violated certain financial reporting, recordkeeping and segregation provisions of the CE Act and CFTC regulations as a result of some reporting and investment practices of Refco during 1990 and 1991. Without any hearing on the merits of the CFTC allegations and without admitting any of the allegations, Refco settled the matter and agreed to payment of a $1.25 million civil penalty, entry of a cease and desist order, and appointment of an independent consultant to review Refco's financial manual. On January 23, 1996, Refco settled a CFTC administrative proceeding (In the Matter of Refco, Inc., CFTC Docket No. 96-2) in which Refco was alleged to have violated certain segregation and supervision requirements and prior cease and desist orders. The CFTC allegations concerned Refco's consolidated margining of certain German accounts which were maintained at Refco from 1989 through April 1992. Refco simply executed and cleared transactions for these accounts in accordance with client instructions; Refco had no role in raising funds from investors or in the trading decisions for these accounts. Refco had received what it considered appropriate authorization from the controlling shareholder of the accounts' promoters to margin the accounts and transfer funds between and among the accounts on a consolidated basis. The CFTC maintained that Refco should not have relied upon such authorizations for the final consolidation of the accounts. Without admitting any of the CFTC allegations or findings, Refco settled the proceeding and agreed to payment of a $925,000 civil penalty, entry of a cease and desist order, and implementation of certain internal controls and procedures. On May 24, 1999, Refco settled a CFTC administrative proceeding (In the Matter of Refco, Inc., CFTC Docket No. 99-12) in which Refco was alleged to have violated certain order taking, recordkeeping, and supervisory rules. The CFTC allegations pertained to the period from January 1995 through December 1995 in which Refco took trading instructions from an independent introducing broker/broker-dealer that had discretionary trading authority over approximately 70 accounts. Without any hearing on the merits and without admitting any of the allegations, Refco settled the proceeding and agreed to payment of a $6 million civil penalty, entry of a cease and desist order, funding of a study on order entry and transmission procedures, and a review of its compliance policies and procedures related to its handling of trades by floor and back office personnel. GNI INCORPORATED. GNI, Inc. ("GNI") is an Illinois corporation with its principal place of business at 30 S. Wacker Drive, Suite 2009, Chicago, Illinois 60606. GNI is registered with the Commodity Futures Trading Commission as a futures commission merchant and is a member of the National Futures Association. 13 As of December 31, 2001, there has not been a material administrative, civil or criminal action, whether pending, on appeal or concluded, involving the Futures Commission Merchant or its principals within the preceding five years that GNI would deem material for purposes of Part 4 of the Commodity Futures Trading Commission Regulations. THE FOREIGN EXCHANGE DEALER REFCO CAPITAL MARKETS, LTD. Refco Capital Markets, Ltd., a wholly owned subsidiary of the Refco Group Ltd., LLC is organized under the laws of Bermuda. Refco Capital Markets, Ltd. maintains its principal office at Suite 542, 48 Par-La-Ville Road, Hamilton HM11, Bermuda, and a telephone number of (441) 295-6960. ITEM 2. PROPERTIES The Fund does not own or lease any physical properties. The Fund's office is located within the office of the General Partner at Two American Lane, P.O. Box 5150, Greenwich, CT 06831-8150. ITEM 3. LEGAL PROCEEDINGS Neither the Fund nor the General Partner is a party to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 2001. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There is no established public trading market for the units. There were approximately 247 holders of units at March 15, 2002. Pursuant to the partnership agreement, distributions of profits, if any, will be made at the sole discretion of the General Partner. As of March 15, 2002 the General Partner had not made, and the General Partner does not currently intend to make, any distributions. In September 1985, the Fund commenced a private placement of units in reliance on exemptions under the 1933 Act, including Section 4(2) and Rule 506 of Regulation D promulgated thereunder. Similar reliance has been placed on available exemptions from securities qualification requirements under applicable state securities laws. Units are offered monthly at a price per unit equal to the then current Net Asset Value per unit, with a required minimum subscription of $26,250 for new investors other than IRAs and Plans and $10,500 for IRAs, Plans and existing unitholders, which amounts include selling commissions of $1,250 and $500, respectively, unless waived in whole or in part. A subscriber may subscribe for units in excess of the foregoing minimum amount in increments of $1,000. As of the date hereof, units are continuing to be offered, and there is no maximum number of units that may be purchased or sold. During the fourth quarter of 2001, no units were sold. 14 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data of the Fund has been derived from the Fund's financial statements for each of the years 1997 through 2001, which were audited by independent certified public accountants. The auditor's report of Arthur F. Bell, Jr. & Associates, L.L.C. on the Fund's statements of financial position at December 31, 2001, 2000 and 1999 and the related statements of operations and changes in partners' capital (net asset value) for each of the three years in the period ended December 31, 2001 are included elsewhere herein.

~~YEAR~~2001 ~~ENDED DECEMBER 31, ----------------------------------------------------------------~~ 2000 1999 1998 1997 ~~1996~~ -------- -------- -------- -------- -------- ~~(IN THOUSANDS EXCEPT FOR AMOUNTS PER UNIT)~~ Operations Data: Realized Gains (Losses) .................... $ 1,794 $ (1,829) $ (4,461) $ 33,752 $ 9,630 ~~$ 33,757~~ Change in Unrealized ....................... $(1,307) 1,813 (2,871) (3,744) 3,796 ~~(16,236)~~ Interest Income ............................ 270 1,071 2,603 3,618 4,981 ~~5,974~~ Brokerage Commissions ...................... 2,282 6,572 9,130 12,437 16,884 ~~$ 15,905~~ Management Fees ............................ 431 1,008 2,114 2,320 2,721 ~~3,317~~ Incentive Fees ............................. 281 801 854 6,600 1,417 ~~6,406~~ General Partner's Administrative Fee for Operating Expenses ............... -- 99 235 618 646 949 ~~1,233~~ Other Expenses ............................. 29 46 98 100 137 ~~228~~ Net Income (Loss) .......................... $(2,366) (7,608) $(17,543) $ 11,523 $ (3,701) ~~$ (3,594)~~ Net Income (Loss) Per Unit (Based on Weighted Average Number of Units Outstanding) .......................... $(1,833) (3,622) $ (4,951) $ 2,735 $ (567) ~~$ (375)~~ Increase (Decrease) in Net Asset Value Per Unit ........................ $(1,881) (4,121) $ (5,297) $ 2,711 $ (308) ~~$ 432~~

YEAR ENDED DECEMBER 31, -----------------------------------------------------~~-----------~~ 2001 2000 1999 1998 1997 ~~1996~~ -------- -------- -------- -------- -------- (IN THOUSANDS EXCEPT FOR AMOUNTS PER UNIT) Financial Position Data ......~~..............~~ General Partner's Capital ....~~..............~~ $74 $144 $ 631 $ 914 $ 769 ~~$ 786~~ Limited Partners' Capital ....~~..............~~ $6,415 11,224 35,058 64,362 66,626 ~~110,244~~ Total Partners' Capital ......~~..............~~ $6,489 11,368 35,689 65,276 67,395 ~~111,030~~ Net Asset Value per Unit .....~~..............~~ $5,769 7,650 $ 11,770 $ 17,068 $ 14,357 ~~$ 14,665~~

15 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion below and elsewhere in this Form 10-K contains certain "forward-looking statements" (as such term is defined in Section 21E of the 1934 Act) that are based on the beliefs of the Fund, as well as assumptions made by, and information currently available to, the Fund. A number of important factors could cause the Fund's actual growth, results, performance and business prospects and opportunities in 2002 and beyond to differ materially from those expressed in, or implied by, any such forward-looking statements. These factors include, without limitation, the factors described below and elsewhere in this Annual Report on Form 10-K. OVERVIEW The assets of the Fund are used to engage, directly or indirectly, in the speculative trading of commodity interests. The assets of the Fund are deposited with the commodity brokers in trading accounts established by the Fund for the advisors and are used by the Fund as margin to engage in trading. Such assets are held in either a non-interest bearing bank account or in securities approved by the CFTC for investment of customer funds. In addition, certain of the Fund's assets may also be placed in a custodian account with a cash manager to maximize the interest earned on assets not committed as margin. CAPITAL RESOURCES The Fund does not have, nor does it expect to have, any capital assets. Redemptions and sales of additional units in the future will affect the amount of funds available for trading commodity interests in subsequent periods. None of the Fund's assets are committed to overhead or operational expenses. There are three factors that affect the Fund's capital resources: (1) the trading profit or loss generated by the advisors (including interest income); (2) the money invested or redeemed by the unitholders; and (3) the capital invested or redeemed by the General Partner. The General Partner has maintained, and has agreed to maintain, at all times a capital account in such amount, up to a total of $500,000, as is necessary for the General Partner to maintain a one percent (1%) interest in the capital, income and losses of the Fund. All capital contributions by the General Partner necessary to maintain such capital account balance shall be evidenced by units of general partnership interests, each of which shall have an initial value equal to the Net Asset Value per Unit at the time of such contribution. The General Partner, in its sole discretion, may withdraw any excess above its required capital contribution without notice to the unitholders. The General Partner, in its sole discretion, may also contribute any greater amount to the Fund, for which it shall receive, at its option, additional units of general partnership interests or Units at their then-current Net Asset Value. RESULTS OF OPERATIONS The Fund incurs substantial charges from the payment of management and/or incentive fees to the advisors and administrative fees to the General Partner which are payable based upon the Net Asset Value of the Fund and are payable without regard to the profitability of the Fund. The brokerage commissions to the commodity brokers are also payable without regard to the profitability of the Fund, although under certain circumstances such commissions have been, and may continue to be, higher when advisors experience profits and as a result increase their trading activity. As a result, in certain years the Fund may have incurred a net loss when trading profits were not substantial enough to avoid depletion of the Fund's assets from such fees and expenses. Thus, due to the nature of the Fund's business, the success of the 16 Fund is dependent upon the ability of the advisors to generate trading profits through the speculative trading of commodity interests sufficient to produce capital appreciation after payment of all fees and expenses. In 1999, Commodity Trading Advisors ("CTAs") and the managed futures industry as a whole experienced their worst annualized performance since 1994. Trend-following CTAs had a particularly difficult time owing to a marked lack of trends in all but a few markets. However, for many commodities trading advisors, the fourth quarter of 2000 proved to be a very favorable period, as these trends were of sufficient magnitude and duration to lift many trading advisors into positive territory for the year. For the industry as a whole it was one of the strongest performance periods in recent history. In general, CTAs analyze the movement of prices in the commodity and financial futures markets to identify trends and the opportunities for profit which accompany them. Because a CTA can take long or short positions in the futures markets, the direction of a trend is less important than the existence of a trend itself. A CTA has the potential to general profits when prices are identified as trending downward, by going short or selling ahead of a price decline, and when prices appear to be trending upward, by going long or buying ahead of the rise in price. When prices are moving sideways (i.e., with little movement up or down) or are exhibiting significant short-term volatility (such as rapid intra-day or inter-day price swings) trends are few and far between, and CTA profits can be flat or negative. In 2001, results were dominated by a declining interest rate environment and the terrorist attacks of September 11. The Board of Governors of the Federal Reserve Board cut interest rates eleven times during the first ten months and provided one of the few consistent trends for industry CTAs in an otherwise difficult trading environment. Stock prices, which were volatile in the first half of 2001, declined significantly after September 11 and bond prices also experienced severe declines in mid November which threatened to undo most of the profitability in the financial sector. The Partnership experienced its heaviest losses in stock indices and energy, which offset any gains held in the financials and pushed the fund into losses in November and December. The following paragraphs present a summary of the Fund's operations for the calendar years 1999 through 2001 and a general discussion of the Fund's trading activities in certain markets during such period. It is important to note, however, that (1) the advisors trade in various markets at different times and that prior activity in a particular market does not mean that such markets will be actively traded by an advisor or will be profitable in the future and (2) the advisors trade independently of each other using different trading systems and may trade different markets with various concentrations at various times. Consequently, the results of operations of the Fund can only be discussed in the context of the overall trading activities of the Fund, the advisors' trading activities on behalf of the Fund as a whole and how the Fund has performed in the past. As of December 31, 2001, the Net Asset Value of the Partnership was $6,488,973, a decrease of approximately 42.92% from its Net Asset Value of $11,367,894 at December 31, 2000. The Partnership's 2001 subscriptions and redemptions totaled $0 and $2,512,975, respectively. For the year ended December 31, 2001, the Partnership had revenues comprised of $1,794,331 in realized gains, ($1,306,941) in unrealized losses and $270,082 in interest income. For that same year, the Partnership had expenses consisting of $2,282,284 in brokerage commissions, $431,476 in management fees, $281,348 in incentive fees, $99,409 in General Partner's administrative fees and $28,902 in other expenses. This resulted in the Partnership having net losses of ($2,365,946). The Net Asset Value per Unit at December 31, 2001 decreased 24.58% from $7,649.82 at December 31, 2000 to $5,769.31 at December 31, 2001. The Fund's trading losses during 2001 resulted primarily from losses in currencies, global stock indices, energies and metals. 17 As of December 31, 2000, the Net Asset Value of the Partnership was $11,367,894, a decrease of approximately 68.15% from its Net Asset Value of $35,688,878 at December 31, 1999. The Partnership's 2000 subscriptions and redemptions totaled $50,000 and $16,762,534, respectively. For the year ended December 31, 2000, the Partnership had revenues comprised of $(1,829,339) in realized losses, $1,813,300 in unrealized gains and $1,070,571 in interest income. For the same year, the Partnership had expenses consisting of $6,572,337 in brokerage commissions, $1,007,719 in management fees, $801,239 in incentive fees, $235,478 in General Partner's administrative fees and $46,209 in other expenses. This resulted in the Partnership having net losses of $7,608,450. The Net Asset Value per Unit at December 31, 2000 decreased 35.01% from $11,770.46 at December 31, 1999 to $7,649.82 at December 31, 2000. The Fund's trading losses in 2000 were primarily due to positions in global interest rates, energies, metals and grains. As of December 31, 1999, the Net Asset Value of the Fund was $35,688,878, a decrease of approximately 45.33% from its Net Asset Value of $65,276,130 at December 31, 1998. The Fund's 1999 subscriptions and redemptions totaled $1,923,122 and $13,967,250, respectively. For the year ended December 31, 1999, the Fund had revenues comprised of $(4,461,303) in realized losses, $(2,871,454) in unrealized losses and $2,603,113 in interest income. For that same year, the Fund had expenses consisting of $9,129,970 in brokerage commissions, $2,114,161 in management fees, $853,963 in incentive fees, $617,880 in the General Partner's administrative fees and $97,506 in other expenses. This resulted in the Fund having net losses of $17,543,124. The Fund's trading losses in 1999 were primarily realized in European and Pacific Rim interest rates, European and U.S. stock indices and tropicals. The Net Asset Value per Unit at December 31, 1999 decreased 31.04% from $17,067.65 at December 31, 1998 to $11,770.46 at December 31, 1999. Past performance is not indicative of future results. As a result, any recent increases in realized or unrealized trading losses may have no bearing on any results that may be obtained in the future. To enhance the foregoing comparison of results of operations from year to year, readers of the Annual Report should examine the Statements of Financial Condition and Operations for the years discussed above, which are included herein. LIQUIDITY Although there is no public market for the Units, a Limited Partner may redeem his Units in the Fund as of any month-end occurring six months or more after such investment was made. With respect to the Fund's trading, in general, the Fund's advisors will trade only commodity interests that have sufficient liquidity to enable them to enter and close out positions without causing major price movements. Notwithstanding the foregoing, most United States commodity exchanges limit the amount by which certain commodities may move during a single day by regulations referred to as "daily price fluctuation limits" or "daily limits." Pursuant to such regulations, no trades may be executed on any given day at prices beyond the daily limits. The price of a futures contract has occasionally moved the daily limit for several consecutive days, with little or no trading, thereby effectively preventing a party from liquidating his position. While the occurrence of such an event may reduce or effectively eliminate the liquidity of a particular market, it will not limit ultimate losses and may in fact substantially increase losses because of this inability to liquidate unfavorable positions. In addition, if there is little or no trading in a particular futures or forward contract that the Fund is trading, whether such illiquidity is caused by any of the above reasons or otherwise, the Fund may be unable to execute trades at favorable prices and/or may be unable or unwilling to liquidate its position prior to its expiration date, thereby requiring the Fund to make or take delivery of the underlying interest of the commodity interest. 18 The Fund's trading may also be impacted by the various conflicts of interest among the Fund and the General Partner, the advisors and the commodity brokers. See "Item 1. Business - Conflicts of Interest". RECENT DEVELOPMENTS In February 2002, the General Partner decided to discontinue the operations of the Partnership effective March 31, 2002. The General Partner anticipates making final liquidating redemption payments to the partners in April 2002. RISK FACTORS PAST RESULTS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE The Fund is a speculative commodity pool. The market sensitive instruments held by it are acquired for speculative trading purposes, and all or substantially all of the Fund's assets are subject to the risk of trading loss. Unlike an operating company, the risk of market sensitive instruments is integral, not incidental, to the Fund's main line of business. Market movements result in frequent changes in the fair market value of the Fund's open positions and, consequently, in its earnings and cash flow. The Fund's market risk is influenced by a wide variety of factors, including the level and volatility of interest rates, exchange rates, equity price levels, the market value of financial instruments and contracts, the diversification effects among the Fund's open positions and the liquidity of the markets in which it trades. The Fund rapidly acquires and liquidates both long and short positions in a wide range of different markets. Consequently, it is not possible to predict how a particular future market scenario will affect performance, and the Fund's past performance is not necessarily indicative of its future results. PRIMARY TRADING AND NON-TRADING RISK EXPOSURES The Fund's primary market risk exposures as well as the strategies used and to be used by the General Partner and the independent advisors for managing such exposures are subject to numerous uncertainties, contingencies and risks, any one of which could cause the actual results of the Fund's risk controls to differ materially from the objectives of such strategies. Government interventions, defaults and expropriations, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, increased regulation and many other factors could result in material losses as well as in material changes to the risk exposures and the risk management strategies of the Fund. There can be no assurance that the Fund's current market exposure and/or risk management strategies will not change materially or that any such strategies will be effective in either the short- or long-term. Investors must be prepared to lose all or substantially all of their investment in the Fund. MEANS OF MANAGING RISK The means by which the Fund and the advisors, severally, attempt to manage the risk of the Fund's open positions is essentially the same in all market categories traded. At the Fund-wide level, the General Partner attempts to manage market exposure by (i) diversifying the Fund's assets among different advisors whose strategies focus on different market sectors and trading approaches, and (ii) monitoring the Fund's actual market exposures on a daily basis. At the advisor level, each advisor applies its own risk management policies to its trading. These policies generally limit the total exposure that may be 19 taken per "risk unit" of assets under management. Many advisors also follow diversification guidelines (often formulated in terms of the maximum margin which they will commit to positions in any one contract or group of related contracts), as well as imposing "stop-loss" points at which open positions must be closed out. In addition, the Fund uses Stonebrook's Volatility Hedge Program to hedge the positions of the Advisor in certain circumstances. Occasionally, advisors will limit the market exposure of their Fund account through acquiring put or call options which "collar" the risk of open positions. However, because of the typically high degree of liquidity in the markets traded by the Fund and the expense of acquiring options, most advisors rely simply on stop-loss policies, requiring the liquidation of positions once losses of a certain magnitude have been incurred. Certain advisors treat their risk control policies as strict rules; others only as general guidelines for controlling risk. The General Partner controls the risk of the Fund's non-trading instruments (interest-bearing securities held for cash management purposes)--the only Fund investments, as opposed to advisor selections, directed by the General Partner--limiting the duration of such instruments to no more than one year. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Fund's financial statements, together with the auditor's report thereon, are included on pages F-1 through F-11 hereof. The following summarized quarterly financial information presents the results of operations for the three month periods ended March 31, June 30, September 30 and December 31, 2001 and 2000.

~~2000~~1st ~~1999~~Quarter ~~----~~2nd ~~----~~Quarter ~~ASSETS~~3rd ~~Equity~~Quarter in4th ~~broker~~Quarter ~~trading~~2001 ~~accounts~~2001 ~~Cash~~2001 $2001 ~~5,623,780 $ 4,036,550 Unrealized gain on open contracts 1,599,598 61,122~~ ---- ----~~---~~ ---- ----~~---~~ ~~Deposits~~Gain ~~with~~(loss) ~~brokers~~from 7commodity trading $ 1,~~223~~763,~~378~~712 4$ (1,~~097~~716,~~672~~866) ~~Cash~~$ ~~and~~152,642 ~~cash~~$ ~~equivalents 2~~249,~~280,867~~627 ~~19,355,234~~Gain ~~Fixed~~from fixed income securities ~~(cost~~38,111 ~~including~~164 ~~accrued~~0 ~~interest,~~0 -Total $3income (loss) 1,~~027~~867,~~532~~451 ~~and $14~~(1,~~658~~605,~~632~~358) 3227,~~087,287~~195 14(268,~~443,563~~184) ~~Subscriptions~~Net ~~receivable~~income 0(loss) 16710,~~880~~229 ~~----------- ----------- Total assets $12~~(2,~~591~~321,~~532~~068) ~~$37~~(433,~~913~~196) (321,~~349~~911) ~~===========~~Net ~~===========~~income ~~LIABILITIES~~(loss) ~~Accounts~~per ~~payable~~unit $492.86 (1,~~806~~771.99) $(347.98) ~~19,710~~(275.67) ~~Commissions~~Increase ~~and~~(decrease) ~~other~~in ~~trading~~Net ~~fees~~Asset onValue ~~open~~per ~~contracts~~Unit ~~63,446~~531.79 5(1,~~895~~755.68) ~~Management~~(348.72) ~~fees~~(307.90) ~~43,186~~Net ~~132,919~~Asset ~~Incentive~~Value ~~fees~~per ~~467,975~~Unit 0at ~~Redemptions~~end ~~payable~~of ~~647~~period 8,~~225~~181.61 26,~~065~~425.93 6,~~947~~077.21 ~~-----------~~5,769.31 ~~-----------~~1st ~~Total~~Quarter ~~liabilities~~2nd ~~1,223,638~~Quarter ~~2,224,471~~3rd Quarter 4th Quarter 2000 2000 2000 2000 ---- ----~~---~~ ---- ----~~---~~ ~~PARTNERS'~~Gain ~~CAPITAL~~ (~~NET~~loss) ~~ASSET~~from ~~VALUE)~~commodity ~~General~~trading ~~Partner~~$ -2,129,976 ~~18.7807~~$ ~~and~~(4,652,693) ~~53.5807~~$ ~~units~~488,028 ~~outstanding~~$2,013,395 atGain ~~December~~(loss) ~~31,~~from ~~2000~~fixed ~~and~~income ~~1999~~securities ~~143~~(72,~~669~~172) ~~630~~(8,~~670~~544) ~~Limited~~33,519 ~~Partners~~52,452 -Total ~~1,467.2533~~income ~~and~~(loss) 2,~~978.4899~~540,742 ~~units~~(4,374,780) ~~outstanding~~696,012 ~~at December 31~~2,192,558 ~~2000~~Net ~~and~~income ~~1999~~(loss) 11(298,~~224~~808) (7,~~225~~151,207) 35(1,~~058~~038,~~208~~507) ~~-----------~~880,072 ~~-----------~~Net ~~Total~~income ~~partners'~~(loss) ~~capital~~per unit (114.75) (3,255.65) (535.24) 529.65 Increase (decrease) in Net Asset Value per Unit (881.76) 11(3,~~367,894~~297.25) ~~35,688,878~~(566.56) ~~-----------~~624.93 ~~-----------~~Net ~~$12~~Asset Value per Unit at end of period 10,~~591~~888.70 7,~~532~~591.45 ~~$37~~7,~~913,349~~024.89 ~~=========== ===========~~7,649.82

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Kenmar Advisory Corp., is the sole General Partner of the Fund. The General Partner, a corporation originally organized as a New York corporation in September 1983 and reorganized as a Connecticut corporation on January 1, 1996, is owned equally and indirectly by Messrs. Shewer and Goodman. The directors and executive officers of the General Partner currently are as follows: MR. KENNETH A. SHEWER, age 49, has been the Chairman and a director of the General Partner since September 1983. Mr. Shewer was employed by Pasternak, Baum and Co., Inc. ("Pasternak, Baum"), an international cash commodity firm, from June 1976 until September 1983. Mr. Shewer left Pasternak, Baum in September 1983 to form Kenmar Advisory Corp. with Mr. Goodman. Mr. Shewer created and managed Pasternak, Baum's Grain Logistics and Administration Department and created its Domestic Corn and Soybean Trading Department. In 1982, Mr. Shewer became co-manager of Pasternak, Baum's F.O.B. Corn Department. In 1983, Mr. Shewer was made Vice President and Director of Pasternak, Baum. Mr. Shewer graduated from Syracuse University with a B.S. degree in 1975. MR. MARC S. GOODMAN, age 54, has been the President and a director of the General Partner since September 1983. Mr. Goodman joined Pasternak, Baum in September 1974 and was a Vice President and Director from July 1981 until September 1983. Mr. Goodman left Pasternak, Baum in September 1983 to form Kenmar Advisory Corp. with Mr. Shewer. While at Pasternak, Baum, 20 Mr. Goodman was largely responsible for business development outside of the United States, for investment of its corporate retirement funds and for selecting trading personnel. Mr. Goodman has conducted extensive business in South America, Europe and the Far East. Mr. Goodman was awarded an Economics and Finance Department Fellowship from September 1969 through June 1971. Mr. Goodman graduated from the Bernard M. Baruch School of Business of the City University of New York with a B.B.A. in 1969 and an M.B.A. in 1971 in Finance and Investments. MS. ESTHER ECKERLING GOODMAN, age 50, has been the Senior Executive Vice President of the General Partner since March 1991 and has also served as Chief Operating Officer of the General Partner since October 1995. Ms. Goodman joined the General Partner in July 1986 and has been involved in the futures industry since 1974. From 1974 through 1976, she was employed by Conti-Commodity Services, Inc. and ACLI Commodity Services, Inc., in the areas of hedging, speculative trading and tax arbitrage. In 1976, Ms. Goodman joined Loeb Rhoades and Company, Inc., where she was responsible for the development and management of a managed futures program which, in 1979, became the trading system for an independent commodity trading advisor of which Ms. Goodman was a founder and principal. From 1983 through mid-1986, Ms. Goodman was employed as a marketing executive at Commodities Corp. (USA) of Princeton, New Jersey. Ms. Goodman was a Director of the Managed Futures Association and its predecessor, the Managed Futures Trade Association, from 1987 through 1995. In addition, she has written several articles and has spoken before various professional groups and organizations on the subject of managed futures. Ms. Goodman attended Vassar College from 1970-1972 and graduated from Stanford University in 1974 with a B.A. degree. Ms. Goodman is married to Mr. Marc S. Goodman. Each director of the General Partner serves until the next annual meeting of stockholders or until a successor is elected. Executive officers of the General Partner are appointed annually and serve at the discretion of its Board of Directors. Messrs. Shewer and Goodman hold directorships in various affiliates of the General Partner. SIGNIFICANT EMPLOYEES OF THE GENERAL PARTNER MR. THOMAS J. DIVUOLO, age 42, Senior Vice President responsible for account administration, oversight and risk management, joined the General Partner in March 1989. From 1982 through 1984, Mr. DiVuolo was employed by Balfour Maclaine International Ltd. working in the commodity accounting and compliance areas. From 1984 through 1986 he was employed at E.F. Hutton and Company, Inc. as a manager of commodity regulatory reporting. From 1986 until he joined the General Partner in 1989, Mr. DiVuolo worked for Lloyds International Trading, a commodity trading division of Lloyds Bank. Mr. DiVuolo is a 1982 graduate of Pace University with a B.B.A. degree in Public Accounting. He received his M.B.A. in Finance from Wagner College in 1990. MR. GARY J. YANNAZZO, age 49, Senior Vice President and Chief Financial Officer, joined the General Partner in August 1997. From March 1992 to July 1995, he was Senior Vice President and Controller of Mettallgesellschaft Corp., a diversified commodity marketing and trading company, with 30 worldwide subsidiaries and $5 billion in annual revenues. From January 1990 through February 1992, Mr. Yannazzo was President, Chief Executive Officer and part owner of Holland Mortgage Corporation. From December 1982 through November 1989, Mr. Yannazzo was First Vice President of Security Capital Corporation, a publicly traded financial services company and affiliate of Smith Barney, Inc. From June 1975 through November 1982, Mr. Yannazzo was with Arthur Andersen & Co., serving as an Audit Manager from June 1980. From August 1995 until he joined the General Partner, Mr. Yannazzo was a private consultant, engaged primarily in projects and ventures in the commodity and derivative 21 areas. Mr. Yannazzo received his B.S. in business administration from Seton Hall University in 1975 and his certified public accountant certification in 1977. MS. JOANNE D. ROSENTHAL, age 36, Senior Vice President and Director of Research, joined the General Partner in October 1999. Prior to joining the General Partner, Ms. Rosenthal spent 9 years at The Chase Manhattan Bank, in various positions of increasing responsibility. From July 1991 through April 1994, she managed the Trade Execution Desk and from May 1994 through September 1999, she was a Vice President and Senior Portfolio Manager of Chase Alternative Asset Management, Inc. Ms. Rosenthal received a Masters of Business Administration in Finance from Cornell University and a Bachelor of Arts in Economics from Concordia University in Montreal, Canada. MR. MARK M. ROSSOW, age 49, Senior Vice President and General Counsel, joined the General Partner in August 2000. From October 1998 until July 2000, Mr. Rossow was a partner in the law firm of Snow Becker Krauss P.C. From May 1994 until September 1998, Mr. Rossow was a partner in the law firm of Amon & Sabatini. Prior to that, Mr. Rossow was in-house counsel to the international accounting firm BDO Seidman. Mr. Rossow has served on the staff of the United States Securities and Exchange Commission. Mr. Rossow earned a B.A. degree from Syracuse University in 1975 and a J.D. degree from the University of Michigan in 1978. He was admitted to practice law in 1979. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the 1934 Act, as amended, requires the General Partner and the directors of the General Partner to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely on a review of the forms it has received and on written representations from certain reporting persons that no such forms were required for them, the Company believes that all Section 16(a) filing requirements applicable to the reporting persons were complied with by them. ITEM 11. EXECUTIVE COMPENSATION The Fund has no directors or executive officers. As a limited partnership, the business of the Fund is managed by its General Partner, which is responsible for the administration of the business affairs of the Fund and receives the compensation described in Item 1 hereof. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The Fund has no directors or officers. The Fund delegates all management of the Fund's affairs to the General Partner. As of March 15, 2002, the General Partner owned approximately 12.7807 units of general partnership interests, representing a 1.17% investment in the Fund. The General Partner is indirectly and equally owned by Messrs. Shewer and Goodman. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The General Partner of the Fund and manages and conducts the business of the Fund. The partnership agreement provides that the General Partner may be compensated in such form(s) and in such amount as the General Partner, in its sole discretion, shall determine, after giving due weight to industry standards. As more fully described in Item 1 hereto, to compensate the General Partner for its management and operations of the Fund, its management and monitoring of the portfolio of the advisors and its assumption of the substantial financial burden of paying all the operating and administrative expenses of the Fund, the Fund currently pays the General Partner an administrative fee. For the year 22 ended December 31, 2001, the General Partners did not receive any management fees and $99,409 in administrative fees. For the year ending December 31, 2000, the General Partner did not receive any management fees and $235,478 in administrative fees. For the year ending December 31, 1999, the General Partner did not receive any management fees and $617,880 in administrative fees. For the year ending December 31, 1998, the General Partner did not receive any management fees and $646,232 in administrative fees. In addition, the General Partner receives from the commodity brokers a portion of the brokerage commissions paid by the Fund to the commodity brokers. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Form 10-K: 1. The following financial statements of the Fund, with the independent auditor's report, are filed as part of this Form 10-K: Independent Auditor's Report; Statements of Financial Condition as of December 31, 2001 and 2000; Condensed Schedule of Investments as of December 31, 2001; Statements of Operations For the Years Ended December 31, 2001, 2000, and 1999; Statements of Changes in Partners' Capital (Net Asset Value) For the Years Ended December 31, 2001, 2000 and 1999; Notes to Financial Statements. 2. All financial schedules are omitted because such schedules are not required or the information required has been presented in the aforementioned financial statements. 3. The following exhibits are filed with this Report or incorporated by reference as set forth below: NUMBER EXHIBIT 3.1* Certificate of Limited Partnership for Kenmar Performance Partners L.P. 3.2* Second Restatement of the Limited partnership agreement of Kenmar Performance Partners L.P., as amended. 10.1* Customer Agreement between the Fund and Refco, Inc. 10.2* Form of Advisory Agreement between Kenmar and the Advisor. 10.3** Master Agreement between the Fund and ING Derivatives, Ltd., dated as of March 22, 1995. 10.4*** Commodity Customer Agreement between the Fund and Internationale Nederlanden (U.S.) Derivatives Clearing, Inc. 10.5*** Netting Agreement and Customer Agreement between the Fund and Refco Capital Markets Ltd. * Incorporated herein by reference to the Fund's Registration Statement on Form 10, filed with the Securities and Exchange Commission on April 29, 1994. ** Incorporated herein by reference to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1994. 23 *** Incorporated herein by reference to the Fund's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. (b) Reports on Form 8-K: The Fund did not file any reports on Form 8-K during the fourth quarter of 2001. 24 KENMAR PERFORMANCE PARTNERS L.P. TABLE OF CONTENTS PAGES ----- Independent Auditor's Report F-2 Financial Statements Statements of Financial Condition December 31, 2001 and 2000 F-3 Condensed Schedule of Investments December 31, 2001 F-4 Statements of Operations For the Years Ended December 31, 2001, 2000 and 1999 F-5 Statements of Changes in Partners' Capital (Net Asset Value) For the Years Ended December 31, 2001, 2000 and 1999 F-6 Notes to Financial Statements F-7 - F-11 F-1 [ARTHUR F. BELL, JR. & ASSOCIATES, L.L.C. LETTERHEAD] INDEPENDENT AUDITOR'S REPORT To the Partners Kenmar Performance Partners L.P. We have audited the accompanying statements of financial condition of Kenmar Performance Partners L.P. as of December 31, 2001 and 2000, including the December 31, 2001 condensed schedule of investments, and the related statements of operations and changes in partners' capital (net asset value) for the years ended December 31, 2001, 2000 and 1999. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kenmar Performance Partners L.P. as of December 31, 2001 and 2000, and the results of its operations and the changes in its net asset values for the years ended December 31, 2001, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 9. to the financial statements, in February 2002, the General Partner decided to discontinue the operations of the Partnership effective March 31, 2002. /s/ Arthur F. Bell, Jr. & Associates, L.L.C. Hunt Valley, Maryland February 26, 2002 F-2 KENMAR PERFORMANCE PARTNERS L.P. STATEMENTS OF FINANCIAL CONDITION December 31, 2001 and 2000

~~Face~~2001 ~~Value~~2000 ~~Description Value~~ ----------- ----------- ~~-----~~ASSETS ~~U.S.~~Equity ~~GOVERNMENT~~in ~~OBLIGATIONS~~broker ~~16.3%~~trading *accounts ~~500,000~~Cash ~~United~~$ ~~States Treasury Notes~~4, ~~5.875%~~055,860 ~~11/30/2001~~ $ ~~503~~5,~~932 1~~623,~~300,000~~780 ~~United~~Unrealized ~~States~~gain ~~Treasury~~on ~~Notes,~~open ~~5.75%~~contracts 352,412 ~~8/15/2003~~ 1,~~347~~599,~~059~~598 ----------- ~~TOTAL~~----------- ~~U.S.~~Deposits ~~GOVERNMENT~~with ~~OBLIGATIONS~~brokers 4,408,272 7,223,378 Cash and cash equivalents 2,242,889 2,280,867 Fixed income securities (~~COST~~cost, ~~INCLUDING~~including ~~ACCRUED~~accrued ~~INTEREST~~interest, - $10 and $3,~~812~~027,~~301~~532) 10 3,~~850~~087,~~991~~287 ----------- ~~FEDERAL~~----------- ~~AGENCY~~Total ~~OBLIGATIONS~~assets ~~10.9%~~$ *6,651,161 ~~400~~$12,~~000~~591,532 ~~Federal~~=========== ~~Home~~=========== ~~Loan~~LIABILITIES ~~Bank,~~Accounts ~~4.875%,~~payable ~~1/22/2002~~$ ~~405,033~~0 ~~400~~$ 1,~~000~~806 ~~Federal~~Commissions ~~Home~~and ~~Loan~~other ~~Mortgage~~trading ~~Corporation~~fees on open contracts 22,260 ~~6.25%~~63,446 ~~10/15/2002~~Management ~~409~~fees 20,~~614~~295 ~~400~~43,~~000~~186 ~~Federal~~Incentive ~~Home~~fees ~~Loan~~0 ~~Mortgage~~467,975 ~~Corporation~~Redemptions payable 119,633 ~~7.00%~~647,225 ~~2/15/2003~~----------- ~~421~~----------- Total liabilities 162,~~649~~188 1,223,638 ----------- ~~TOTAL~~----------- ~~FEDERAL~~PARTNERS' ~~AGENCY~~CAPITAL ~~OBLIGATIONS~~ (~~COST~~NET ASSET VALUE) General Partner - 12.7807 and 18.7807 units outstanding at December 31, ~~INCLUDING~~2001 ~~ACCRUED~~and ~~INTEREST~~2000 73,736 143,669 Limited Partners - $1,~~215,231)~~111.9582 and 1,~~236~~467.2533 units outstanding at December 31,~~296~~ 2001 and 2000 6,415,237 11,224,225 ----------- ~~TOTAL~~----------- ~~FIXED~~Total ~~INCOME~~partners' ~~SECURITIES~~capital (~~COST,~~Net ~~INCLUDING~~Asset ~~ACCRUED~~Value) ~~INTEREST~~6,488,973 11,367,894 ----------- ----------- $3 6,~~027~~651,~~532)~~161 $312,~~087~~591,~~287~~532 =========== ===========

See accompanying notes. F-3 KENMAR PERFORMANCE PARTNERS L.P. CONDENSED SCHEDULE OF INVESTMENTS December 31, 2001 LONG FUTURES CONTRACTS No. of % of Net Contracts Description Value Asset Value --------- ----------- -------- ----------- 87 Agricultural $ 13,950 0.21% 34 Currency 51,844 0.80% 289 Interest rate 11,968 0.18% 221 Metals 58,731 0.91% 62 Stock index 48,028 0.74% -------- ---- TOTAL LONG FUTURES CONTRACTS $184,521 2.84% -------- ---- SHORT FUTURES CONTRACTS No. of % of Net Contracts Description Value Asset Value --------- ----------- -------- ----------- 404 Agricultural $ 76,603 1.18% 33 Currency 23,582 0.36% 17 Energy (232) 0.00% 399 Interest rate 86,939 1.34% 61 Metals (17,933) (0.28)% 7 Stock index (1,068) (0.01)% -------- ---- TOTAL SHORT FUTURES CONTRACTS $167,891 2.59% -------- ---- TOTAL FUTURES CONTRACTS $352,412 5.43% ======== ==== See accompanying notes. F-4 KENMAR PERFORMANCE PARTNERS L.P. STATEMENTS OF OPERATIONS For the Years Ended December 31, 2001, 2000 and 1999

2001 2000 1999 ~~1998~~ ------------ ------------ ------------ INCOME Commodity trading gains (losses) Realized $ 1,696,301 $ (1,559,770) $ (3,759,349) ~~$ 33,490,318~~ Change in unrealized (1,247,186) 1,538,476 (2,622,172) ~~(3,553,583)~~ ------------ ------------ ------------ Gain (loss) from commodity trading 449,115 (21,294) (6,381,521) ~~29,936,735~~ ------------ ------------ ------------ Fixed income securities gains (losses) Realized 98,030 (269,569) (701,954) ~~262,372~~ Change in unrealized (59,755) 274,824 (249,282) ~~(190,287)~~ ------------ ------------ ------------ Gain (loss) from fixed income securities 38,275 5,255 (951,236) ~~72,085~~ ------------ ------------ ------------ Interest income 270,082 1,070,571 2,603,113 ~~3,618,242~~ ------------ ------------ ------------ Total income (loss) 757,472 1,054,532 (4,729,644) ~~33,627,062~~ ------------ ------------ ------------ EXPENSES Brokerage commissions 2,282,284 6,572,337 9,129,970 ~~12,437,404~~ Management fees 431,476 1,007,719 2,114,161 ~~2,320,273~~ Incentive fees 281,348 801,239 853,963 ~~6,599,903~~ General Partner administrative fee for operating expenses 99,409 235,478 617,880 ~~646,232~~ Cash management service charge 847 10,167 50,167 ~~77,793~~ Legal expenses 28,054 36,042 47,339 ~~22,232~~ ------------ ------------ ------------ Total expenses 3,123,418 8,662,982 12,813,480 ~~22,103,837~~ ------------ ------------ ------------ NET ~~INCOME~~ (LOSS) $ (2,365,946) $ (7,608,450) $(17,543,124) ~~$ 11,523,225~~ ============ ============ ============ NET ~~INCOME~~ (LOSS) PER UNIT (based on weighted average number of units outstanding during the year) $ (1,832.81) $ (3,622.07) $ (4,950.97) ~~$ 2,734.83~~ ============ ============ ============ ~~INCREASE~~ (DECREASE) IN NET ASSET VALUE PER UNIT $ (1,880.51) $ (4,120.64) $ (5,297.19) ~~$ 2,710.89~~ ============ ============ ============

See accompanying notes. F-5 KENMAR PERFORMANCE PARTNERS L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (NET ASSET VALUE) For the Years Ended December 31, 2001, 2000 and 1999

Partners' Capital -------------------------------------------------------------------------------------- General Limited Total ---------------------- ------------------------- --------------------------------------- Units Amount Units Amount Units Amount --------- --------- ----------- ------------ ----------- ------------ Balances at December 31, ~~1997~~1998 53.5807 $ ~~769~~914,~~245~~497 43,~~640~~770.~~7205~~9723 $ 6664,~~625~~361,~~712~~633 43,~~694~~824.~~3012~~5530 $ 6765,~~394~~276,~~957~~130 Net ~~income~~(loss) for the year ended December 31, ~~1998~~1999 ~~145~~(283,~~252~~827) 11(17,~~377~~259,~~973~~297) 11(17,~~523~~543,~~225~~124) Additions 0.0000 0 82120.~~5487~~8024 1,~~335~~923,~~740~~122 82120.~~5487~~8024 1,~~335~~923,~~740~~122 Redemptions 0.0000 0 (~~952~~913.~~2969~~2848) (1413,~~977~~967,~~792~~250) (~~952~~913.~~2969~~2848) (1413,~~977~~967,~~792~~250) --------- --------- ----------- ------------ ----------- ------------ Balances at December 31, ~~1998~~1999 53.5807 ~~914~~630,~~497~~670 32,~~770~~978.~~9723~~4899 6435,~~361~~058,~~633~~208 3,~~824~~032.~~5530~~0706 6535,~~276~~688,~~130~~878 Net (loss) for the year ended December 31, ~~1999~~2000 (~~283~~242,~~827~~535) (177,~~259~~365,~~297~~915) (177,~~543~~608,~~124~~450) Additions 0.0000 0 ~~120~~4.~~8024~~5920 150,~~923,122~~000 ~~120~~4.~~8024~~5920 150,~~923,122~~000 Redemptions 0(34.~~0000~~8000) 0(244,466) (~~913~~1,515.~~2848~~8286) (1316,~~967~~518,~~250~~068) (~~913~~1,550.~~2848~~6286) (1316,~~967~~762,~~250~~534) --------- --------- ----------- ------------ ----------- ------------ Balances at December 31, ~~1999~~2000 5318.~~5807~~7807 ~~630~~143,~~670~~669 21,~~978~~467.~~4899~~2533 3511,~~058~~224,~~208~~225 31,~~032~~486.~~0706~~0340 3511,~~688~~367,~~878~~894 Net (loss) for the year ended December 31, ~~2000~~2001 (~~242~~32,~~535~~939) (72,~~365~~333,~~915~~007) (72,~~608~~365,~~450~~946) ~~Additions 0.0000 0 4.5920 50,000 4.5920 50,000~~ Redemptions (346.~~8000~~0000) (~~244~~36,~~466~~994) (~~1,515~~355.~~8286~~2951) (162,~~518~~475,~~068~~981) (~~1,550~~361.~~6286~~2951) (162,~~762~~512,~~534~~975) --------- --------- ----------- ------------ ----------- ------------ Balances at December 31, ~~2000~~2001 1812.7807 $ ~~143~~73,~~669~~736 1,~~467~~111.~~2533~~9582 $ 116,~~224~~415,~~225~~237 1,~~486~~124.~~0340~~7389 $ 116,~~367~~488,~~894~~973 ========= ========= =========== ============ =========== ============

Net Asset Value Per Unit --------------------------------------- December 31, 2001 2000 1999 --------- --------- ---------- $5,769.31 $7,649.82 $11,770.46 ========= ========= ========== See accompanying notes. F-6 KENMAR PERFORMANCE PARTNERS L.P. NOTES TO FINANCIAL STATEMENTS Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. General Description of the Partnership Kenmar Performance Partners L.P. (the Partnership) is a New York limited partnership. The Partnership is a multi-advisor, multi-strategy commodity pool which trades in United States (U.S.) and foreign futures and options contracts. It is subject to the regulations of the Commodity Futures Trading Commission, an agency of the U.S. government which regulates most aspects of the commodity futures industry; rules of the National Futures Association, an industry self-regulatory organization; and the requirements of commodity exchanges and Futures Commission Merchants (brokers) through which the Partnership trades. The Partnership is a registrant with the Securities and Exchange Commission (SEC) pursuant to the Securities Exchange Act of 1934 (the Act). As a registrant, the Partnership is subject to the regulations of the SEC and the informational requirements of the Act. B. Method of Reporting The Partnership's financial statements are presented in accordance with accounting principles generally accepted in the United States of America, which require the use of certain estimates made by the Partnership's management. C. Commodities Gains or losses are realized when contracts are liquidated. Net unrealized gains or losses on open contracts (the difference between contract trade price and quoted market price) are reflected in the statement of financial condition. Any change in net unrealized gain or loss from the preceding period is reported in the statement of operations. Brokerage commissions include other trading fees and are charged to expense when contracts are opened. D. Cash and Cash Equivalents Cash and cash equivalents includes cash and investments in money market mutual funds. Interest income includes interest-equivalent dividends on money market mutual funds. E. Fixed Income Securities Fixed income securities are reported at market value plus accrued interest. Fixed income securities transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. F-7 KENMAR PERFORMANCE PARTNERS L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F. Income Taxes The Partnership prepares calendar year U.S. and applicable state information tax returns and reports to the partners their allocable shares of the Partnership's income, expenses and trading gains or losses. G. Foreign Currency Transactions The Partnership's functional currency is the U.S. dollar; however, it transacts business in currencies other than the U.S. dollar. Assets and liabilities denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect at the date of the statement of financial condition. Income and expense items denominated in currencies other than the U.S. dollar are translated into U.S. dollars at the rates in effect during the period. Gains and losses resulting from the translation to U.S. dollars are reported in income currently. Note 2. GENERAL PARTNER The General Partner of the Partnership is Kenmar Advisory Corp., which conducts and manages the business of the Partnership. The General Partner is required by the Limited Partnership Agreement to maintain an investment in the Partnership of 1% of the Net Asset Value, up to a total of $500,000. A portion of the brokerage commissions paid by the Partnership to certain brokers is, in turn, paid by the brokers to the General Partner. During 1999, the General Partner rebated to certain multi-million dollar investors a portion of the compensation it receives for managing the Partnership. Such rebates were made by issuing additional units and, during 1999, amounted to $263,639. No such rebates to multi-million dollar investors occurred during 2001 or 2000. Note 3. COMMODITY TRADING ADVISORS The Partnership has advisory agreements with various commodity trading advisors pursuant to which the Partnership pays monthly management fees of 0% to 1/12 of 2% (2% annually) of the net asset value under management (as defined in each respective advisory agreement) and quarterly incentive fees of 10% to 25% of the profit subject to incentive fee (as defined in each respective advisory agreement). Effective October 1, 2000, one of the commodity trading advisors pays its entire incentive fee of 10% to the General Partner. No incentive fee was earned by that commodity trading advisor during the period October 1, 2000 to December 31, 2001. F-8 KENMAR PERFORMANCE PARTNERS L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 4. DEPOSITS WITH BROKERS The Partnership deposits cash with brokers subject to Commodity Futures Trading Commission regulations and various exchange and broker requirements. Margin requirements are satisfied by the deposit of cash with such brokers. The Partnership earns interest income on its cash deposited with the brokers. Note 5. OTHER EXPENSES The General Partner pays substantially all ordinary operating and administrative expenses incurred by the Partnership. The Partnership pays the General Partner a monthly administrative fee equal to 1/12 of 1% (1% annually) of the prior month's beginning Net Asset Value of the Partnership. The Partnership also pays actual amounts incurred for cash management services and services performed by independent legal counsel. Note 6. SUBSCRIPTIONS, DISTRIBUTIONS AND REDEMPTIONS Investments in the Partnership are made by subscription agreement, subject to acceptance by the General Partner. The subscription price is equal to the Net Asset Value of the units purchased plus a 5% selling commission, unless waived in whole or in part by the General Partner. Additions to partners' capital are shown net of such selling commissions, which amounted to $0, $0 and $8,733 in 2001, 2000 and 1999, respectively. The Partnership is not required to make distributions, but may do so at the sole discretion of the General Partner. A Limited Partner may request and receive redemption of units owned, subject to restrictions in the Limited Partnership Agreement. Note 7. TRADING ACTIVITIES AND RELATED RISKS The Partnership engages in the speculative trading of U.S. and foreign futures contracts and options on U.S. and foreign futures contracts (collectively, "derivatives"). The Partnership is exposed to both market risk, the risk arising from changes in the market value of the contracts, and credit risk, the risk of failure by another party to perform according to the terms of a contract. Purchase and sale of futures and options on futures contracts requires margin deposits with the brokers. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a broker to segregate all customer transactions and assets from such broker's proprietary activities. A customer's cash and other property (for example, U.S. Treasury bills) deposited with a broker are considered commingled with all other customer funds subject to the broker's segregation requirements. In the event of a broker's insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than total cash and other property deposited. F-9 KENMAR PERFORMANCE PARTNERS L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 7. TRADING ACTIVITIES AND RELATED RISKS (CONTINUED) The Partnership has a substantial portion of its assets on deposit with brokers and dealers in securities and other financial institutions in connection with its cash management activities. In the event of a financial institution's insolvency, recovery of Partnership assets on deposit may be limited to account insurance or other protection afforded such deposits. For derivatives, risks arise from changes in the market value of the contracts. Theoretically, the Partnership is exposed to a market risk equal to the notional contract value of futures contracts purchased and unlimited liability on such contracts sold short. As both a buyer and seller of options, the Partnership pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option. Written options expose the Partnership to potentially unlimited liability, and purchased options expose the Partnership to a risk of loss limited to the premiums paid. The General Partner has established procedures to actively monitor market risk and minimize credit risk, although there can be no assurance that it will, in fact, succeed in doing so. The Limited Partners bear the risk of loss only to the extent of the market value of their respective investments and, in certain specific circumstances, distributions and redemptions received. F-10 KENMAR PERFORMANCE PARTNERS L.P. NOTES TO FINANCIAL STATEMENTS (CONTINUED) Note 8. FINANCIAL HIGHLIGHTS The following information presents per unit operating performance data and other supplemental financial data for the year ended December 31, 2001. This information has been derived from information presented in the financial statements. PER UNIT PERFORMANCE (for a unit outstanding throughout the entire year) --------------------------------------------------- Net asset value per unit at December 31, 2000 $ 7,649.82 ---------- (Loss) from operations: Net investment (loss) (1), (3) (442.37) Net realized and change in unrealized (loss) from trading (2), (3) (1,438.14) ---------- Total (loss) from operations (1,880.51) ---------- Net asset value per unit at December 31, 2001 $ 5,769.31 ========== TOTAL RETURN (24.58)% ========== SUPPLEMENTAL DATA Ratios to average net asset value: Expenses prior to incentive fees (4) (6.18)% Incentive fees (3.10)% ----------- Total expenses (1) (9.28)% =========== Net investment (loss) (1) (6.30)% ===========

Total return is calculated based on the change in value of a unit during the year. An individual partner's total return and ratios may vary from the above total return and ratios based on the timing of redemptions. ---------- (1) Excludes brokerage commissions and other trading fees. (2) Includes brokerage commissions and other trading fees. (3) The net investment (loss) per unit is calculated by dividing the net investment (loss) by the average number of units outstanding during the year. The net realized and change in unrealized (loss) from trading is a balancing amount necessary to reconcile the change in net asset value per unit with the other per unit information. (4) Excludes brokerage commissions, other trading fees and incentive fees. Note 9. SUBSEQUENT EVENT In February 2002, the General Partner decided to discontinue the operations of the Partnership effective March 31, 2002. The General Partner anticipates making final liquidating redemption payments to the partners in April 2002. F-11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 26th day of March, 2002. KENMAR PERFORMANCE PARTNERS L.P. By: Kenmar Advisory Corp., general partner By: /s/ Kenneth A. Shewer ------------------------------------------- Kenneth A. Shewer Chairman Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 26th day of March, 2002. KENMAR PERFORMANCE PARTNERS L.P. By: Kenmar Advisory Corp., general partner By: /s/ Kenneth A. Shewer ------------------------------------------- Kenneth A. Shewer Chairman and Director (Principal Executive Officer) By: /s/ Mark S. Goodman ------------------------------------------- Marc S. Goodman President and Director By: /s/ Thomas J. DiVuolo ------------------------------------------- Thomas J. DiVuolo Senior Vice President (Principal Financial and Accounting Officer for the Fund)

Net Asset Value Per Unit -------------------------------------------------- December 31, 2000 1999 1998 ---- ---- ---- $ 7,649.82 $11,770.46 $17,067.65 ========== ========== ==========

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